The infrastructure of everyday life
"
Foundational Economy", subtitled "The infrastructure of everyday life", was written by the Foundational Economy Collective, 2018, 208 pages, 68k words. "
Praise for Foundational Economy" has 17 blurbs, a new record maybe? 1 is from Paul Mason, whose
"Postcapitalism" is 1 of my favs of
the economics books I have read.
It is the 6th book in the "Manchester Capitalism" series.
Manchester Capitalism is a series of books which follows the trail of money and power across the systems of our failing capitalism.
The Foundational Economy Collective consists of: Davide Arcidiacono, Filippo Barbera, Andrew Bowman, John Buchanan, Sandro Busso, Joselle Dagnes, Joe Earle, Ewald Engelen, Peter Folkman, Julie Froud, Colin Haslam, Sukhdev Johal, Ian Rees Jones, Dario Minervini, Mick Moran, Fabio Mostaccio, Gabriella Pauli, Leonhard Plank, Angelo Salento, Ferdinando Spina, Nick Tsitsianis, Karel Williams. For purpose of copyright the authors of this book are Julie Froud, Sukhdev Johal, Michael Moran, Angelo Salento and Karel Williams.There is a Foreword by Colin Crouch; Acknowledgents; 5 chapters; and an Afterword titled "Measuring and shaping the economy", by Andy Haldane.
I stumbled across this book when I was looking for something to name Prescriptive MMT - Foundational Economics sounded like it had possibilities - oops, already taken. [I settled on Stability Economics, with Balance Economics as an option.] I think the use of the terms in this book and series, which will be defined shortly, is much more appropriate. Still, it made it seem like this should be the next economics book for me to read. Short and sweet too :->
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The Foreword defines the Foundational Economy:
Foundational Economy is a book which does this [the bringing together of things previously unassociated] for some central themes: the need for and neglect of infrastructure and problems arising in the outsourcing of its provision and the privileging of financial services over other activities; the neglect of the basic in the search for the dazzlingly new; the rights and duties of citizenship; Amartya Sen and Martha Nussbaum's concept of capabilities; regional and urban industrial policy. These are all brought together within the idea of the foundational economy: those goods, services and other forms of provision that are necessary for the good life to be enjoyed by as many people as possible.
Ahhh, the Good Life reminds me of the 1st Economics book I read:
"How Much Is Enough? Money and the Good Life", by the Skidelsky's. Interesting that Crouch says "
as many people as possible" instead of "all people". My pinned tweet is the Orwell quote "Either we all live in a decent world, or nobody does." Hmmm, not sure how much to be disturbed by this 1/2-hearted wording. Conservatives might say we have already succeeded in this [weak] goal - that 50% of the population of the developed countries is "
as many people as possible".The biggest opponent of establishing a flourishing Foundational Economy is Neoliberalism. The book contains some eye-opening information on the machinations of vulture capitalism.
Three of the extraordinary ideological triumphs of neoliberal ideas have been widespread acceptance: first, that financial transactions are the most valuable kind of economic activity, and as many other activities as possible should develop their financial possibilities; second, that the collective is always inferior to the individual, and should if possible be redefined in terms of the latter; third, that no goods or services are more important than others and therefore all can be traded in one market.
Some of these problems are laid at the feet of our old friend
Homo Economicus. How is he still around? I would think someone would have put him out his misery by now.
But for many the tension between the collective and the individual who is central to the liberal world view is unbridgeable. For this we can partly blame contemporary economic and political theory, which have placed the totally self-oriented, rationally choosing, context-free individual at the heart of their models of human life.
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Chapter 1 is titled "Introduction: foundational matters". The authors do a better job at definining the Foundational Economy: they use the word "all", yay!
This book ... argues that the well-being of Europe's citizens depends less on individual consumption and more on their social consumption of essential goods and services – from water and retail banking, to schools and care homes – in what we call the foundational economy. Individual consumption depends on market income, while foundational consumption depends on infrastructure and delivery systems of networks and branches, which are neither created nor renewed automatically, even as incomes increase. The distinctive, primary role of public policy should therefore be to secure the supply of basic services for all citizens.
We briefly hear about
Piketty's findings on economic inequality, which are of course traced back to the 1980's and Thatcherism/Reaganism. Here's some more definition of the foundational economy:
The foundational concept focuses attention on the goods and services which are the social and material infrastructure of civilised life because they provide daily essentials for all households. These include material services through pipes and cables, networks and branches distributing water, electricity, banking services and food; and the providential services of education, and health and social care, as well as income maintenance. These are welfare-critical activities for all households in the sense that limited access has a significant effect on the welfare of households and social economic opportunity for citizens.
The COVID-19 pandemic has certainly given us all a concrete appreciation of the foundational economy, with grocery store employees being declared heroes and front-line soldiers in the struggle against the virus. The foundational economy is the part of the economy that could not be shut down. It is the foundation upon which facets of Stability Economics - Universal Basic Income, Universal Job Guarantee, permanent stimulus programs - would be built.
The foundational economy is also important as a source of employment: right across Europe, 40% of the workforce is in these ‘sheltered’ activities – meaning that they are generally not subject to the pressures of international competition.
The authors totally understand and declaim the secret sauce of vulture capitalism.
managers and fund investors were engineering cash extraction so that in the privatised UK water industry, for instance, the regulator allowed all the profits to be distributed as dividends, while investment was financed by adding debt.
There you have it, modern predatory venture capitalism, in a nutshell. Loot the pension funds and cash-on-hand to pay yourself huge management fees and bonuses, load the company up with debt, and be ready to move on to the next one when it all goes belly-up.This next is I think 1 of the greatest insights in the book.
The foundational economy (public or private) had historically been low risk, steady return with a long time horizon, and expectations of a 5% return on capital. In our financialised form of capitalism, privatisation and outsourcing bring in stock market quoted corporates, private equity houses and fund investors with market-driven requirements for a return of more than 10%, and business models developed in high risk, high return, short time horizon activities.
So where's that extra 5% in profit going to come from? More on that later.
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Chapter 2 is titled "(Re)discovering the foundational". The history of the development of the foundational economy is traced. It is largely a story about cities. I had not heard or thought this next, but it certainly rings true.
Through most of history, cities were so unhealthy that they relied on inward migration to maintain population.
European cities started fixing themselves, with clean water, gas, and electricity, in the mid-19th century. In third world countries, this is obviously still ongoing. But since the end of "Les Trente Glorieuses" in 1975, Europe and more particularly the English-speaking countries the UK and the US, things have been moving in the opposite direction. Part of that is GDP worship. And even as people look for other measures of well-being than GDP, there is still much tech worship, the hunt for the next "
Unicorn" corporation.
Against this background of discussion about broadening measures, there has recently been a narrowing of the policy field of vision onto the component of GDP generated by one part of the market economy, knowledge-intensive business services (KIBS) and high-tech manufacturing.
A precursor to the idea of the foundation economy was "
the economic and social history of Fernand Braudel." Then
In 2013, we proposed the idea of a ‘foundational economy’ producing welfare-critical goods and services like housing, education, childcare, healthcare and utility supply ... The sphere of the foundational was then demarcated by three criteria: these goods and services were necessary to everyday life; were consumed daily by all citizens regardless of income; and were distributed according to population through branches and networks. They were partly non-market, generally sheltered and one way or another politically franchised.
The foundational economy has multiple "
domains".
- the material foundational economy is labelled thus for an obvious reason: it consists classically of the pipes and cables, networks and branches which continuously connect households to daily essentials – like water, electricity, retail banking and food – where interruption of supply results in immediate crisis. There is also another critical feature of this domain: it generates a revenue stream from households and, as a result, in recent decades private provision or privatisation of state provision has proved an attractive policy option. ...
- the providential foundational economy, is labelled thus because it turned the state into a source of providential good fortune through (mainly) public-sector welfare activity providing universal services – like health and education – and income transfer available to all citizens. Its provision is now increasingly outsourced in some countries, but still heavily dependent on state funding or financing because it is either typically means-tested or free-at-point-of-use.
I think that this next is very important, and is something that I am coming to recognize as a hallmark of 21st century economics: that issues of morality must be included.
the foundational economy gains a moral significance, for providential and material together establish our everyday notions of what constitute the basic human needs that must to be met to ensure that lives can be lived to their full potential.
And just outside the foundational, there are all the other things that people have been so upset to lose access to during the pandemic lockdowns.
there will be an outer domain, an overlooked economy of lifestyle and comfort support systems, which are occasionally purchased out of discretionary income but nevertheless arise from established cultural expectations. In Europe, we all expect to be able to visit a hairdresser or to buy a sofa for the living room. We call this the overlooked economy because policymakers and the media focus attention elsewhere on more glamorous activities.
Another definition of the foundational economy:
The foundational ... is the broad social infrastructure of safe and civilised life.
What most would call "progress" is what has built this foundation. But, there is a fly in the ointment. What can be build can be unbuilt.
But the political alignments were always conjunctural and (as we now know) reversible because the foundational economy does not have an inbuilt ratchet mechanism which consolidates progress: the history of the foundational economy is not a Whig history of citizens gaining ever more rights and recognition of needs.
...
But that achievement contained the seeds of its undermining after 1980 in a new conjuncture when an impoverished state could be preyed upon by financial engineers. What the central state gave, it could also take away; and the material and providential were, in an increasingly financialised capitalism, an attractive source of saleable assets and predictable cash flows.
I think I was introduced to the concept of "financialised capitalism" in
Paul Mason's "Postcapitalism", where he referred to it as "financialization". I think that the ideas there are similar to those here - they definitely agree on the fact that it is by and large bad.Returning to the development of the foundational economy, in the 2nd 1/2 of the 19th century, it was definitely led by cities. [Cities seem to be a level at which government can still function somewhat efficiently.]
The Birmingham model of municipal socialism, invented by Joseph Chamberlain as Mayor in the early 1870s, applied the profits of municipalised gas and water to civic improvement.
Hmmm, finally someone agrees with me that one of the main things that ended Les Trente Glorieuses was "
The damage to Keynesian economic management was benchmarked by the two great oil shocks of 1972–4 and 1979–81"
They used a term that makes so much sense, I am surprised that I had not seen it before: "high-paid ‘Fordist’ employment". "Fordism" is most excellent concept of paying your workers enough that they can afford to buy your product. In retrospect, why have none of the other economics books I've read used this term or concept?!?!? Meanwhile, at the current state of financialization of our economy, rather than build a factory, make a product, pay workers wages, etc, the capitalist is more likely to open a payday check-cashing / loan-sharking operation - probably the same ROI and a lot less trouble.
This chapter ends with an Appendix listing Activities classified as material, providential or overlooked.
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Chapter 3 is titled "Wrecking the foundational". You know this chapter is going to be bad news when the 1st section is titled "
Follow the money".
follow-the-money methods can be applied to understand the predatory but entirely legal operations of financialised capitalism.
In addition to "
financial capitalism", the authors use another good term "
financial engineering". I mentioned I think Paul Mason called it "financialization". I've referred to it as "vulture capitalism".
In this article Mark Cuban describes high frequency stock trading as 'hacking' Wall Street. I think that "
financial engineering" could also be described as "financial hacking".
The story here is not only about the devices of financial engineering levered on the use of debt and tax shelters within (and without) the home jurisdiction; it is also about the financial benefits obtained by private operators from the use of power against other stakeholders.
...
A new financialised economy has been organised since the 1980s around the principle of point value, short time horizons and cash extraction for investors; this point value approach is particularly ill suited to foundational activities which generate a modest long run, stream of value for citizens, continuously over a period of time.
How did it go so wrong? Under Thatcher and Reagan, private was always better than public. Facts were ignored. [Privatization always === put lots of $$$ in the pocket of some fat cat.]
This ignored the possibility that Europe's nationalised heavy industries had charged low output prices, effectively subsidising other (mainly private) sectors. It also ignored the possibility that integrated, engineering-led organisations were best suited to running technically complex networks.
That last line reminds me of
the bullet we hopefully just recently dodged: a private equity firm buying the nonprofit that controlled .org domains. More similar sentiment:
the underlying problem here was not experts but the outsourcing of public policy and decision making to the wrong kind of experts: investment bankers, business service consultants and think tanks with mainstream economists providing the intellectual support.
So which are free market advocates, delusional or disingenuous? Corporations don't want competition, they want monopolies. Hence the current corporate landscape with ever-bigger conglomerates and ever-decreasing competition. Where are the trustbusters in the government when we need them? Who you gonna call?
The authors of the new model regulation were promoting an abstract model of capitalism where competition and markets drive benefits for consumers. Actual capitalists (corporate managers and fund investors) by contrast, have always preferred profits from the abridgement of competition.
This is a textbook case of how privatization usually works:
The results were quite surreal in the case of UK water and sewerage, which was privatised in 1989 under the regulatory agency Ofwat.
...
the operators have been allowed to distribute all their post-tax profits as dividends; in the decade to 2016, £18.1 billion was distributed out of total profits of £18.8 billion. ... sector debt rose from almost zero in 1989 to nearly £40 billion in 2016 ... Under irrelevant regulation, the operators were effectively allowed to finance cash extraction now by piling up debt liabilities in the future; and all of this debt was private-sector borrowing at much higher rates than the state would have paid.
One of the main pillars of the American Dream (I don't know about the British Dream) is home ownership. This was financialized in the run up to the 2008 Global Financial Crisis (GFC).
The result before (and after) the 2007–9 financial crisis was ‘privatised Keynesianism’ (Crouch 2009), with private consumption boosted on the upswing by cash withdrawal after re-mortgage of a house or flat whose market price had increased. This had the effect of creating a bias against the foundational economy because households were taking out more private debt to supplement wages and fund individual consumption.
...
Here, as in so much to do with financialisation, the British and Americans led the way to a new kind of rentier capitalism.
...
The financial crisis in many ways just brought forward inherent problems about the pursuit of growth and jobs through such means: private debt stimulates erratic, unsustainable growth of GDP; low-wage jobs increase demands for providential spending on income support. Privatised Keynesianism became a recipe for boom-and-bust economic growth because house prices cannot rise indefinitely, and corrections of uncertain severity and duration are inevitable.
This is a good summary:
This history of the privatised and outsourced foundational economy since the 1908s [1980s] is therefore a story of the modern sale of the monopolies against a background of careless thought and undisclosed policy objectives. The developing aversion to public investment in the services of the foundational economy was paralleled by the development of a privatised Keynesian consumption system that depended on the sugar rush of income from privately held assets, notably property. The logic of all this was intensified by the policy response to the great financial crisis which degraded public finances in a way that licensed a new age of austerity. This was disastrous for providential services dependent on continuing revenue funding. But the foundational was also struggling, even before the age of austerity, with the toxic consequences of privatisation and outsourcing in a financialised system, as levered power plus financial engineering led to predation.
The authors now start getting into more detail about that missing 5% that is going to cause so many problems.
Most foundational activities (like delivering water or rail transport) have physical characteristics that make them low risk, long time horizon activities where, historically, public and private providers of investment funds have accepted modest, steady financial returns. But privatisation and outsourcing, in a financialised world, brought in public companies and private equity under pressure from the financial markets for substantially higher returns.
...
Their expectations of high risk and high return were, as we have argued, driven by financial innovation around asset allocation, reinforced from the early 1990s by shareholder value ideology and finance theory that dictated the need for a premium over risk-free returns. ... all aimed for returns on capital of 10% or more – with returns preferably supplemented by growth (organic or via acquisitions) to boost profits and capital values.
...
But foundational infrastructure had classically been built by central or local government which paid 5% or less on their borrowings; shareholders in privately owned foundational businesses like nineteenth-century railway companies had accepted similar returns.
If you grew up playing Monopoly, you know this very well. "Electric Company" and "Water Works" were mediocre sources of income. "The average rent is only $28 ($70 if you also own both utilities.)"
Clearly unacceptable to high roller venture capitalists or private equity dudes - "there was therefore an expectations gap".
So the key question, not just for the care home sector but for numerous other privatised and outsourced foundational activities is: how can financial returns be levered up towards target? The answer is two-fold: first, by the use of power against stakeholders (labour, suppliers and consumers) to reduce costs or boost revenues; second, by using the devices of financial engineering not just to minimise tax liabilities but to strip operating subsidiaries of assets and burden them with liabilities.
So let's look at the "
three levers and a couple of devices" in the vulture capitalist's toolbox.
- Levering profits on labour is an effective strategy when labour-intensive foundational services operate in deregulated labour markets, allowing pay and conditions to be degraded. ...
- Where purchases account for a large percentage of sales, as in food retailing, then leverage can be applied against suppliers. ...
- Profits can be levered on consumers if there is scope for using confusion pricing to boost margins. ...
- The simplest financial device for levering profit is cash extraction achieved via the balance sheet, classically by selling assets and/or burdening operations with debt or other liabilities like rent. ...
- Another classic financial device is opportunist transactions, meeting short-term requirements for cash to hit quarterly earnings targets or boost the calculated internal rate of return.
Ahhh, that 3rd item: "
confusion pricing". All these years of being annoyed and pissed off by my phone and particularly my cable company, I never knew that what they were doing had a name. Assholes.
So why do we let the vulture capitalists get away with it? Their only justification completely doesn't hold water.
The alibi of those in the financial markets is that the stakeholder injuries and sector disorganisations described in this section serve a larger social good. It is all part of a virtuous process by which the financialisation of operations and assets produces cash streams that go to ordinary people through insurance and private pensions that depend on returns from the stock market, private equity and hedge funds. The problem is that the distribution of wealth is unequal, and citizens therefore have very unequal claims on the cash stream from financialised assets and operations held by funds. ... There is therefore no credible (re)distributive social justification for the predations of financial engineering in the foundational economy.
We see this over and over again. Robert Reich calls it "capitalism for the poor, socialism for the rich". The financial industry is bailed out again and again, with their losses being eaten by the government, i.e., by all of us, while the gains from their increasingly risky speculations go only to the rich speculators.
private profit can be found in operating railways as long as the state takes responsibility for capital investment in infrastructure:
This inequality, this pillaging of what used to be part of a commons, weakens the social structure, weakens the social contract.
exploitation and extraction set up processes of economic disorganisation whose general effect could be described as social disconnection. Since the 1980s, there has been a weakening of our capacity to impose the values of decency, reciprocity and restraint on the business world. The root of this weakness is financialisation, the process by which businesses are driven by the logics of maximising shareholding return and by financial engineering in the new world of finance for its own sake seeking high returns regardless of foundational activity characteristics.
The financial sector increasingly is "
disconnected from its social context of norms and values in the surrounding society". The almighty dollar (or pound) rules all. Money talks, bullshit walks.
Karl Polanyi described 4 stages of disconnection: from production, from long-term thinking, from the territory/locality, and from work. All that is left, all that matters is the fungible capital.
In its historical origins, the foundational economy was at heart a moral enterprise.
Remember when morality meant more than money? I guess it's appropriate that the chapter ends with a quote from Pope Francis - very succinct IMO.
A disease of the economy is the progressive transformation of entrepreneurs into speculators.
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Chapter 4 is titled "The constitution of the foundational". This chapter looks at the role and duties of citizens, both human and corporate.
In the classical economic literature, Adam Smith's Wealth of Nations (1776) is underpinned by his Theory of Moral Sentiments (1759) which invokes ‘pity or compassion, the emotion we feel for the misery of others, when we either see it, or are made to conceive it’ and insists that the happiness of others is necessary though we derive no material benefit from it.
After I read
"Wealth of Nations", I felt like I should also read "Theory of Moral Sentiments" - but "Wealth of Nations" was just too much of a slog to go back for more.
Mainstream economics, with its physics envy, wants to be about numbers and math and forget that there are things like human values, norms, and morality.
mainstream economics remains epistemologically hostile to the normative because many economists maintain a positivist distinction between fact and value in the hope of demarcating a scientific and value-free economics.
But surely there is more than that.
Andrew Sayer is quoted:
‘the moral economy embodies norms and sentiment regarding the responsibilities and rights of individuals and institutions with respect to others’.
We are also introduced to
Amartya Sen and "
the capabilities approach" and
Martha Nussbaum:
In the work of Sen, the philosopher best known for this analysis, human capabilities are linked to the idea of the good life and the possibilities for human flourishing.
...
for Sen and Nussbaum, economic resources are not a technical input to production but a politico-moral means to well-being and flourishing; ...
If we turn now to examine the historical development of the foundational economy we can see a kind of practical working out of the theory of human needs and human capabilities, because foundational provision amounts to a kind of immanent (implicit) moral theory of citizenship.
Foundational economy claims the moral high ground.
Thus our argument is that the foundational economy has, from the beginning, performed a moral economy: that is, the goods and services it provides enact some conception of the good life, even though it is rare for that conception to be expressed in such elevated terms.
A foundational economy has a physical extent - normally a nation state. So being a citizen of a nation is currently a prerequisite for the support of the foundational economy? Tough luck for refugees and the stateless. One would hope that in the future a global foundational economy would exist.
A second solution therefore to the problem lies in ‘thickening’ the meaning of citizenship by disconnecting it from its historical links with territory, and transforming its meaning into something that is part of the very essence of being human and social.
...
These here and now decisions necessarily have consequences for those who are unheard and unfranchised – either because they have not yet been born or because they are excluded from the jurisdiction.
...
In 2015, the Welsh Government passed the Well Being of Future Generations (Wales) Act which requires existing public bodies and new Public Service Boards to think about the long-term impact of their decisions on sustainable development and seven well-being goals.
But there is another theme here. Humans are 1 thing, the semi-immortal group mind AIs aka corporations are another.
At the heart of the foundational economy is a kind of dualism, as this is increasingly a space where individual citizens face corporate citizens.
Ha ha, reminds me of "Rollerball". Who will win, the individual or the corporate state?
These processes hugely empowered fund investors and corporate actors, who as juridical persons gained rights without duties.
And of course, heaven forbid that any government not be bend-over-backwards "business friendly".
The 'business friendly’ result was an attempt to manage (all) private business by carrots, without sticks.
...
Foundational activities employing 40% of the workforce in each national economy should have been exempted from the regime of give-aways because their activities were mainly immobile when anchored by distribution networks to specific populations. But the foundational was invisible, and economic policy in Europe treated private business as though it was all mobile and footloose and needed to be offered privileges and concessions lest it shift operations to other, more attractive sites.
Within this competitivity frame, policymakers competed to offer privileges, losing sight of the old liberal collectivist presumption that, if the state offered big business privileges (like joint stock organisation or state funded infrastructure), then corporations should in return accept obligations. The American liberal collectivist Adolf Berle (1962) had written of a ‘tacit social contract’ between the corporation and society, but that seems to have vanished after 1980.
So can we do anything about bad privatizations, or has the horse left the barn for good?
The answer is to make their obligations explicit and morally defensible, not by renationalisation, which changes ownership, but by constitutional reform which brings them into the public domain and subjects them to a new kind of regulation.
...
since the institutions of the foundational economy are delivering basic public services, they must have public status.
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Chapter 5 is titled "Renewing the foundational". So how do we fix it? Ha ha, the 1st section of this chapter has another "Oops!" title: "
Foundational renewal as a wicked problem".
The challenge is to turn this book's moral argument about human flourishing and capabilities, and its political argument about citizenship, into an economic and political practice that overcomes obstacles and delivers better access to foundational economy goods and services.
I have been very pleasantly surprised at the traction Universal Basic Income (UBI) has gotten in the last few years. The authors I think want to extend the UBI concept.
‘universal basic’ has become a new catch phrase: thus, we have not just experiments in universal basic income in Finland and the Netherlands but also, as discussed below, proposals in the UK for universal basic infrastructure and universal basic services.
Maybe I'm reading too much into it, but my impression is that the authors are not fans of UBI - they don't think it goes far enough.
The key issue here is whether basic income is accompanied by corollary policies which enforce minimum wages and conditions and more positively aim for living wages; without such action, basic income easily becomes an incentive for employers to pay sub-standard wages which will be topped up by the state.
...
Universal basic income ignores the broader conditions of flourishing, which require the provision of foundational services, and all the social overhead capital expenditure that entails.
...
The recent UK proposals for universal basic infrastructure and universal basic services do indeed recognise that income is not enough. ... they include four more clearly social services: housing...; transport ...; free meals ...; and free communications ...
OK, enough love for UBI. We now get their prescription for fixing things:
everything in the preceding chapters of this book shows that, over the last generation, retreating states have, through failure to control privatisation and outsourcing, licensed the disorganisation of the foundational economy and extraction by those with high-return business models. Something more radical is needed that addresses the limits of this model of policymaking, the character of this state and the way that state incapacity and corporate predation are both outside the field of the visible for metropolitan and regional elites.
Their prescription takes the form of "
four key shifts".
Shift 1: Ask citizens what they want so that foundational policy can come out of a conversation, not a top-down agenda
This seems common-sensical. The Internet certainly facilitates more participatory democracy. The problem here is, studies in the US consistently show that legislators don't do what their constituents want, they do what their donors want. For the 2nd time, "money talks, bullshit walks".
Shift 2: Extend social influence over business by adopting social licensing for all large corporates (public, not-for-profit and private) and mapping small and medium enterprises (SMEs) and micro businesses to build their capabilities
...
Ending the ‘business friendly’ model of policy is sensible because it has achieved so little.
...
The shift does connect with much earlier studies showing a link between concentrations of SMEs and higher levels of community well-being
They like small businesses, who doesn't? But, anecdotally, I know of several good, successful family-run businesses that reached a point of the current owners wanting to retire and being unable to find a family member or a buyer to take over the business, such that the business wound up shuttered. I lost both the nursery and the feed and grain where I used to buy seeds and veggie starts - I now use Lowe's or Home Depot :-(
One exception to that was my friends who founded "Carmichael's Bookstore", Louisville's Oldest Independent Bookstore, who have successfully handed the business to their daughter and a niece [no jinx]. But, a bookstore is a cool, artsy place. Ditto for restaurants, bars, nightclubs. There is some degree of art involved in the product, unlike a feed & grain store. Increasingly, I think people who aren't willing to be corporate salarymen want to feel like they are doing something creative, or at least artsy. I am reminded of the 1986 story by Bruce Sterling (@bruces) "The Beautiful and The Sublime".
My point is, small businesses are at a great disadvantage re longevity, a facet of viability, compared to the semi-immortality of large corporations.
Shift 3: Reinvent taxation so that there is a revenue base for foundational services and investment
The discussion of taxation is pretty standard. They point out that a Value Added Tax is regressive.
What we need is taxes on wealth, especially experiments with land value tax.
I seem to remember someone else talking about a land value tax recently but I can't find it.
I still think the gold standard for new taxes is this 2017 article by UBI advocate Scott Santens. So creative!
Shift 4: Build hybrid foundational alliances with intermediate institutions because government is not always benign or competent
So, national governments in Europe, and definitely the US, are increasingly incapable of governing. Despite the generally higher levels of accomplishment at the state and particularly the city level, these smaller and less powerful government entities can be even more prone to
regulatory capture than national governments.
here there is cause for concern about how, in many of Europe's major cities, local government is sponsoring property-led regeneration as the socially meretricious and privately profitable substitute for foundational renewal. The city region governments which built the foundational economy through great projects 100 or so years ago have, since the 1990s, been giving out planning permissions so that property developers can make money without profit-sharing or social housing pay back – and sometimes at the cost of population clearances – let alone providing social infrastructure like schools or parks.
That excerpt contains our new word for the book: "
meretricious". Mirriam-Webster defines it as "of or relating to a prostitute : having the nature of prostitution" or "tawdrily and falsely attractive". Pretty harsh - maybe not so much so in British English ;->I was assuming they would talk here about the increasing positive role of NGOs or some such, but not particularly.
Summarizing this chapter:
The four shifts outlined here are a mix of the utopian and the immediately practical – in other words they are entirely characteristic of any radical programme.
Well, OK, I guess.
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This book was a quick and easy read, and introduced me to some scholars I had not heard of before - or had heard of and forgotten ;-> And I find it incredible how the COVID-19 pandemic has shone a huge, bright spotlight on both the foundational and the overlooked economies. One wonders how long it's going to take for people to start caring about the rest of it - the discretionary economy? - again.
Like the last economy book I read/reviewed on MMT, this book has a descriptive part (Chapters 1-4) and a prescriptive part (Chapter 5). And, like the MMT book, the descriptive is spot on, very strong, the prescriptive is, meh.
Identifying the foundational economy and its importance to society, and how it is being undermined by predatory financial capitalism, are very important insights. The 4 "shifts" discussed in Chapter 5 seem weak to me.
#1, sure, ask your citizens, but, for the 3rd time, "money talks, bullshit walks".
#2, can anything other than a world-wide effort reign in the multi-national corporations? Some countries are trying. But very disappointingly last week the EU's attempt to recover some $$$ from Apple's Irish sandwich was thrown out in court.
#3, more taxes to try to reverse the 30 years of Thatcherism/Reaganism, sure, but, I really feel we need MMT here: just print the damn $$$ you need, put it on the Fed balance sheet. The proper use of taxes is as a tool to try to wrangle the ultra-rich - period.
#4, I never really got a feel for what exactly they were talking about. Maybe because they mostly talked about UK institutions?
We've had Stakeholder Theory since the early 1970s or 1980s. We've had Benefit Corporations in the US since 2010. I have no idea if these have had any real impact. And they surely are not embraced by the beasts of the financial world, the predatory venture capital, private equity, and hedge fund firms.
Financial capitalism, financial engineering, financialization, vulture capitalism. MMT posits that money does not matter, what matters is resources. My rede that "Money is Software" contained this link that estimates that the value of derivative investments is 5-10x the value of ALL other forms of money put together.
So money is software, and "financial engineers" have figured out how to hack that software - how to create money without adding any real (resource) value - in fact, with vulture capitalism actually destroying resources and value.
How is that legal? Can we just make anything that creates money without adding value illegal? A kind of fraud? Does Elizabeth Warren have a plan for that?
The world has limited resources. Do we really want the economy to be similarly limited? The answer is, YES! We can't consume more resources, both sources and sinks, than the world can provide - see "Doughnut Economics", which got some props in Chapter 5, yay!
But, no worries, having made the transition to a digital/software based economy, there is practically infinite room for growth there. FTW!
Money just seems like such a bad concept, such a buggy system. What could we replace it with? Maybe something that made it impossible for any individual to have more than, say, 1000x as much of it as any other individual? A progressive cryptocurrency?
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